Do I need to get permission from my mortgage lender to have lodgers in my house?

eduardo123

I’m just about to buy my first house and am wondering if I can have one or two lodgers to help me save during the first couple of years?  I want to have some friends live with me!

The property will be my primary and only residence, so I won’t be “letting” the property. That being said, I want to make sure I don’t break any rules and break the conditions of my mortgage. From what I can tell it’s not required to get permission, but want to be sure. I equally don’t want to make a fuss and raise any flags before things fully go through.

Anyone got advice? My lender is Coventry and the mortgage is a standard residential mortgage.

Thank you!

propertyrental

What does the mortgage deed you signed say?

See also

https://forums.moneysavingexpert.com/discussion/6409809/which-lenders-have-problems-with-getting-in-a-lodger#latest

sevenhills

When I informed my mortgage provider they didn't seem interested.
It could make a difference to your buildings insurance, my lodger insurance cost £10 more

Clueless56

Even if it is OK under your mortgage terms, I believe that if you have more than one lodger at a time, you could end up having to pay capital gains tax when you eventually come to sell, whereas one lodger comes under the Rent a Room Scheme.  Definitely worth checking that too.  This is from something I heard on the radio a while back, so I'm sorry I'm light on detail about it.

artyclarty

It may be worth checking with your local council too. In our area, if three unrelated people live in the same house then HMO licensing and regulations apply. Of course, this differs from area to area, so may not apply in your case, but it's always better to check!

herebeme

Most banks only care about letting if you are not staying in residence. Even then many will allow a short-term let (check terms and conditions).

I have a lodger under the rent a room scheme. The rent money goes into my current account (same bank as with my mortgage) called “rent”. It never occurred to me to even ask if it is ok (I now checked, it is ok). 

You’d do better to check the tax implications. If you have friends lodging, let’s say 2 of them at once, then the £7500 from the rent a room scheme is divided by 2. Which is then £3750 per person per year, a rent of £312.50 per person per month including bills. Anything above £7500 is taxable (minus losses). 

Agree re artyclarty’s post, check your local authority regs on HMOs; in my LA there are 5 wards where all HMO exemptions are suspended, but otherwise HMO regs only kick in with 5 or more unrelated people in as lodgers. 

Will you be a freeholder or leaseholder? Some leases have restrictions on letting. 

Also you are letting. It’s just not a assured short term tenancy (AST). Make sure you know the difference, make sure you have the right type of contract, and think about where you are going to put deposits as you don’t have to use the deposit scheme. 

As a first time buyer you need to be prepared for how differently you are going to feel about living in something that is “yours” versus a rental property. And that your friends are not going to feel that way. You will need clear rules about what is and isn’t ok in the same way as any other letting, and maybe more so as you are living there (for example I have a no drugs rule, no pets, no parties, no loud music, and no overnight guests except by prior agreement). Are you going to allow them to nail things to the wall or blu-tac? Does your house have pale carpets - are you gonna allow your friends to drink red wine or walk through with outdoor shoes or not? You will now be the one paying for wear and tear and damage. Will they be paying to replace the locks and provide new keys for everyone if they lose a key? You need to understand your own comfort levels for issues that will arise, and budget for things like repainting when the lodgers leave. 

You will need to provide some basic furniture in their bedrooms to qualify for the rent a room scheme, so allow budget for that too. Also, although it’s not required, you may want to consider gas safety checks each year, smoke and carbon monoxide detectors and fire extinguishing equipment in the kitchen. You may want to provide the right type of extension cables rather than allow your lodgers to overload your sockets risking fire.  

Finally, make sure you have a will and executors and ensure they know what notice they need to give the lodgers in the event of your death (otherwise they risk the lodgers defaulting into a AST potentially causing issues). 

Check out the MSE post on this topic with lots of helpful links 

https://forums.moneysavingexpert.com/discussion/comment/74464603#Comment_74464603

silvercar

"You’d do better to check the tax implications. If you have friends lodging, let’s say 2 of them at once, then the £7500 from the rent a room scheme is divided by 2. Which is then £3750 per person per year, a rent of £312.50 per person per month including bills. Anything above £7500 is taxable (minus losses). "

I think you have this the wrong way round. If 2 joint owners let a room to a lodger under the rent a room scheme, they can each claim the rent a room allowance of £3750. 

Also your last sentence shouldn't have "Minus losses" you either claim the losses/ expenditure against the income or you use the £7500 rent a room allowance, you can't do both.

herebeme

silvercar said:

I think you have this the wrong way round. If 2 joint owners let a room to a lodger under the rent a room scheme, they can each claim the rent a room allowance of £3750. 

But OP is not talking about two joint owners? I read the post that it was one owner wanting to put two lodgers in the house? Then the scheme annual allowance of £7500 is divided across the two lodgers. That’s what I was trying to say anyway. One owner can use £7500 total. The owner doesn’t get more allowance with more lodgers. 

Sorry, wording was sloppy on the losses, yes you can’t do both in one year. You can switch between method A and method B and offset loses on future years. 

”5.2 Using losses

If you’ve made a loss, you can use them against your rental profits in future years to reduce the tax you have to pay. You can also use them against your gross receipts over £7,500 (or £3,750) if you pay tax using Method B.”

https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2021#losses

I guess there are some years when it might be worth it? 

diystarter7

eduardo123 said:

I’m just about to buy my first house and am wondering if I can have one or two lodgers to help me save during the first couple of years?  I want to have some friends live with me!

The property will be my primary and only residence, so I won’t be “letting” the property. That being said, I want to make sure I don’t break any rules and break the conditions of my mortgage. From what I can tell it’s not required to get permission, but want to be sure. I equally don’t want to make a fuss and raise any flags before things fully go through.

Anyone got advice? My lender is Coventry and the mortgage is a standard residential mortgage.

Thank you!

Hi OP

Some if not most of it covered but :

Check with your lender as they can vary
Advise you buildings ins & contents if you have it
Consider liability insurance (read up on that )

Consdier rent a room scheme
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

NB: I'm not sure if the rent a room scheme impacts the tax position of your home if you sell it, but others will tell you or you can investigate to be certain

Thanks

ps - I think I recall someone telling me a while back the rent a room allwane is 7.5k i think and if it is a joint ownnership, then the amount of 7.5k is shared ie 3.75k

the rent a room scheme advises you of your obligations

I'm not sure what the rules are outside the rent a room scehme as i have never rented a room/etc in the house we live in

eduardo123

So for clarity around the RAR scheme, I will be joint owners with my partner. So I’m assuming it’ll be £7500/year between us both or the account we hold together for mortgage payments etc. 

The deed doesn’t mention lodging, it only talks about letting. If we chose to let we need their permission, which makes sense. But otherwise there is no mention of lodging/RAR schemes.

silvercar

eduardo123 said:

So for clarity around the RAR scheme, I will be joint owners with my partner. So I’m assuming it’ll be £7500/year between us both or the account we hold together for mortgage payments etc. 

The deed doesn’t mention lodging, it only talks about letting. If we chose to let we need their permission, which makes sense. But otherwise there is no mention of lodging/RAR schemes.

£3750 rent a room allowance each. Mortgage considerations are irrelevant as you don’t get expenses if you are are using the RAR scheme. So you both have half the income each to pay potentially tax on if you exceed the allowance.

I wouldn’t worry about consent for a lodger. Lodgers living with their landlord have few legal rights. If anything in the deeds or indeed the mortgage lender held objections you could just give notice to the lodger.